Posted by Gary Mackley-Smith on December 11, 2017
Stamp Duty Land Tax will be replaced by a Land Transaction Tax in 2018, and a new income tax will be introduced in 2019 as part of important tax changes coming to the country of Wales.
As part of an ongoing programme of devolution that has already seen Scotland given key tax powers, Wales will also be getting its own tax-raising powers. Businesses and individuals with interests in Wales will need to take note of the changes.
Stamp Duty Land Tax (SDLT) becomes Land Transaction tax (LTT) from 1 April 2018, to be collected by the Welsh Revenue Authority (WRA). This is the first new Welsh tax for over 800 years.
HM Revenue & Customs (HMRC) will not accept SDLT returns for land transactions in Wales with an effective date of transaction on or after 1 April 2018.
Anyone planning to purchase land or property in Wales on or after 1 April 2018 will need to check with their professional advisers about the arrangements for LTT.
The Welsh Government published rates and bands for LTT in October 2017, but the residential rates have since been updated following the UK government's introduction of SDLT relief for first-time buyers in the November 2017 Budget. In essence, the starting threshold for residential LTT is increased from £150,000 to £180,000 from 1 April 2018.
The LTT rate is computed on the same banding approach as SDLT, i.e. by reference to how much consideration falls into each band.
Residential property (updated 11 December 2017)
|£0 - £180,000||0%|
|£180,000 - £250,000||3.5%|
|£250,000 - £400,000||5%|
|£400,000 - £750,000||7.5%|
|£750,000 - £1,500,000||10%|
As with SDLT in England, there is a 3% surcharge on the purchase of additional residential properties.
|£0 - £150,000||0%|
|£150,000 - £250,000||1%|
|£250,000 - £1,000,000||5%|
HMRC has issued guidance on Welsh transactions falling either side of 1 April 2018.
The rates and bands will be reflected in the final Budget, and regulations will be laid before the Welsh National Assembly in January 2018.
Income tax rates for Welsh taxpayers will take effect from 5 April 2019, but will continue to be collected by HMRC. Revenue from the Welsh rates of income tax will go to the Welsh Government.
Taxpayers will not need do anything as long as HMRC has their correct address.
From April 2019, the UK government will reduce each of the 3 rates of income tax – basic, higher and additional rate – paid by Welsh taxpayers by 10p. The National Assembly for Wales will then decide the 3 Welsh rates of income tax, which will be added to the reduced UK rates. The combination of reduced UK rates plus the Welsh rates will determine the overall rate of income tax paid by Welsh taxpayers.
This is similar to the system introduced for Scotland.
If the National Assembly sets each of the Welsh rates of income tax at 10p, this will mean the rates of income tax paid by Welsh taxpayers will continue to be the same as that paid by English and Northern Irish taxpayers.
The National Assembly may decide to set different rates to reflect Wales’ unique social and economic circumstances.
Landfill tax is being replaced with a Landfill disposals tax from 1 April 2018. This will also be administered by the WRA.
Whilst further information on these tax changes can be found on the Welsh Government website, if you have any particular concerns about how these changes may affect your tax position, please contact your usual Bishop Fleming adviser, or a member of our Personal Tax team.